Danske Bank posts £92m loss for 2012

Danske Bank's Northern Ireland business made a £92m loss in 2012 as impaired loans continued to weigh on its balance sheet, but the bank's CEO expects it to be back in profit by 2015.

The Danish owned company said that for the year to Dec. 31 it recorded profits of £65m before impairment charges – the money set aside for bad loans it is likely to be forced to write off – up from £38m.

But that underlying profit figure was outweighed by the £157m of impaired loans on its balance sheet, which Danske attributed to the low valuation of impaired assets in the current depressed property market.

The £92m pre-tax loss was a big improvement on the £217m loss the bank posted for 2011 and the figure for impaired loans was also significantly lower than the £255m charge it took in the previous year.

Gerry Mallon, Head of Danske Bank UK and Ireland (above), said: "I am pleased with these results, which show that we are firmly on track towards our goal of returning to profitability.

"It was a momentous year for us and yet also one which continued to be challenging given prevailing economic conditions. Despite this environment, underlying profit continued to move in the right direction, increasing 69 per cent year on year. Increased income, continued significant cost reduction and stabilising impairment levels have combined to deliver an improved financial result in 2012."

Mr Mallon told journalists that while he still expected impairment charges to be greater than operating profit for the next two years, he was "comfortable" making the prediction that the bank would return to profit in 2015 as these bad debts returned to more normal levels.

Total income at the bank was relatively flat at £187m with overall lending volumes down by 7% on year, reflecting lower business activity levels, although the balance of mortgages was up 3%.

The strong underlying profit increase was primarily down to a 17% reduction in costs, which fell to £122m from £147m, reflecting exceptional expenses incurred in 2011 and tighter management of spending last year, the bank said.

Danske also closed several bank branches during the year and it said that in light of changing consumer habits towards online banking it would "continue to reconfigure our branch footprint this year" where appropriate.

Mr Mallon said there would be a need for banks to maintain a physical presence on the high street for customers to complete major transactions, but added that he expects the number of Danske branches continue to reduce over the next decade as its business model adapts to customer demand.

One of Northern Ireland's so-called "big four" banks, Danske changed its name from Northern Bank at the end of 2012 to bring it in line with its parent company's brand. The CEO said Danske had spent "a couple of million" on the rebrand.

"Our rebrand to Danske Bank in November marked the beginning of a new era for us and for banking in Northern Ireland. It was a mammoth task, but recent research shows that we have made good progress in raising awareness of our new name. We are off to a good start and one I am confident we will build on in 2013," said Mr Mallon.

In keeping with the new brand Danske Bank notes will begin to be issued in the Spring, with the new notes retaining the pictures of Northern Ireland inventors currently used on Northern Bank currency.

The Danske Bank Group saw its full year pre-tax profits almost double to £938m from £473m in 2011. Profit before impairment charges was up 18% to £2.31bn.

Dankse also said impairment charges across the group had dropped around 5% to £1.37bn from £1.48bn, mainly because of lower charges at its banking units in Denmark, Northern Ireland and Ireland, including the non-core business unit established as part of a restructure last year.